Big , bold and glorious

What is so great about Warren Buffett?

He still wiped the floor with everyone else, and is the most successful investor of all time.

He runs $50 billion in float and a $200 billion company with only 18 staff. Most startups have more reportable staff than Buffett does.

Just to rub it in, he will give away 99% of his wealth.

He still lives in the home he bought way back in the 50s.

Most people have better offices than he does.

Most people drive better cars than he does.

I have a better phone than he does. But then again – he does have a jet – which he jokingly called “The Indefensible”.

He’s not an ass hole.

He’s does not suffer from the Halo effect and is unimpressed with wealth, both his and others.

He is empathetic towards the poor and doesn’t suffer from the just-world fallacy that most rich people suffer from.

He is one of the world’s richest people.

He understands how his privileged upbringing made him, and understands why it is important not to attribute success to personal traits but rather environmental factors .

He is extremely rational.

He sees through bullshit – easily.

He is an atheist.

He constantly looks to the data in making decisions on mega-cat risk and future cash flows of his businesses (actuaries are his favourite friends).

He saw the GFC driven derivative blow up way back in 2002, and acted more or less accordingly. I think he was one of the few individuals to have ~$30 billion in cash at the height of the crash. Safe to say – he bought everything.

He knows that mark-to-market or mark-to-volatility is bullshit. I think he called it mark-to-imagination or something.

He has an impressive memory and a savant like knowledge of most of finance – an edge he applies with almost merciless glee to exploit the huge gaping hole that are inefficient capital markets.

He knows that true risk is the height of the cliff that the drunk man walks along, and not his various second-by-second stumbling.

He knows that the market doesn’t provide useful information and any incremental trade should be of as much import as a comment on a Perez Hilton blog.

He understands the importance of staying within one’s circle of competence, the Dunning-Kruger effect and how easy it is for people to get tricked into thinking that they know something when they don’t.

He understands that whether or not you have made money means nothing – what matters is the rationale behind it – the outcome is irrelevant, the prior probabilities aren’t.

He understands that he is nothing without society and believes that “claim checks” should go to those who can best use them while being alive.

He finds modern financial theory a grand joke and a mere extension of the anchoring bias.

He mocks investment bankers, MBAs and many volatility absorbed quants with glee.

He moves billions of dollars in capital through public markets without moving them and without you knowing what he is entering or exiting.

He understands the value of the option present in cash.

He understands that derivatives have nothing to do with derivatives, and everything to do with the fundamental underlying assets – he sees the trees from the forests.

He understands the power of compounding interest.

He understands the value of deferred taxes, float, cash, other people’s money and having the balls to say that everyone else is wrong during a crisis.

He doesn’t care what you think and he doesn’t care what the market thinks.

He is cool under pressure. How would you feel when you had to run $50 billion in capital during the GFC?

He has returned a ~20% CAGR over 50 years.

He has made his early investors into hundred millionaires.

He understands that at the end of the day – all that matters is catastrophic risk and cash in the bank. Everything else is noise